Podcasts

CUES 114:  If Diversity Is Our Strength, Inclusion Is Our Superpower—an Interview With Michael Bach

James Lenz  0:04  

You're listening to the CUES Podcast episode 114.

Hello, CUES Nation, Welcome to the show! My name is James Lenz CUES, Professional Development Manager. On behalf of Credit Union Executives Society, we thank you for joining us today. As you know, we use this podcast forum to speak with credit union industry leaders and cross-industry experts for a wide range of perspectives on trends and topics relevant to you. 

Our guest for today is Michael Bach. Michael is internationally recognized as a thought leader, motivational speaker and subject matter expert in the fields of diversity, equity, inclusion and accessibility. Having received numerous awards throughout his career for his work, Michael is the CEO of the Canadian Center for Diversity and Inclusion, which helps employers create inclusive workplaces in Canada and around the world. 

He is also author of the book, Birds of All Feathers Doing Diversity and Inclusion Right. In this episode, Michael shares his support why it is so important for organizations to have a diverse executive team. He will also share some action steps towards creating a more inclusive, representative and equitable society. 

In addition, you'll have a chance to hear from a member of CUES podcast nation. One of our listeners submitted a question and we'll tackle that and more in this 114th episode of the CUES Podcast. Here's my interview with Michael Bach, CEO of the Canadian Centre for Diversity and Inclusion.

Hi, Michael, thank you for spending some time with CUES podcast nation today. Welcome to the show. 

Michael Bach  1:52  

Thanks so much for having me. It's great to be here. 

James Lenz  1:54  

Now, in an effort to get our listeners to get to know our guests a little bit I often ask my guests if they have a mantra or success quote that they live by professionally. Michael, do you have a success quote or mantra that you'd be willing to share with our listeners? 

Michael Bach  

That's a great question to start off with. I would say that it's a bit funny, but “what doesn't kill you didn't try hard enough.” I'm, you know, a person who is constantly focused on moving forward and success and change. And I try to keep things a bit light in the work I do. And that's one of my favorite mantras.

James Lenz

I like it. Now, how do you define leadership? It's neat to follow a little bit about your evolution as a professional and now as leader of your organization. But can you explain what you mean by leadership and maybe give an example? 

Michael Bach  

Yeah, when we talk about leadership, we tend to talk about leaders, you know, the CEO, the C-suite executives. But I think that leadership is a behavior that can be exhibited by anyone in the organization because we all have the potential to impact our co-workers’ experience in the workplace. Regardless of whether or not we are subordinates, whether we work directly with a person at all, we have the potential to impact that experience. And I would say that leadership is about how you act in an organization, in an environment, in a community, in terms of the way you treat other people because you set an example. And that's what leadership is, you lead by example. And it is about your own behavior regardless of whether or not you think you have any, any power in the organization. You have a lot of power. 

James Lenz

Very nice. Now, Michael, you are the leader of the Canadian Centre for Diversity and Inclusion. What experiences led you to creating the Canadian Centre for diversity and Inclusion?

Michael Bach  

I've been working in diversity for about sevenish years at that point. And I felt that there was really a gap in the Canadian landscape as it relates to diversity inclusion. There wasn't a single organization where I as a diversity and inclusion practitioner could turn to in order to access resources and really figure out what I was dealing with. 

Keeping in mind Canada is the second-largest country in the world physically, but we've got a population that is smaller than the state of California. So, we have a very large country, small populations spread out quite dramatically. And then there's lots of different groups underneath the umbrella of diversity. 

So, there was a real challenge in in looking at this conversation holistically across the country. So, I started to sort of scribble on the back of napkins what I envisioned would be helpful for me as a DEI practitioner and led that into some iteration and eight years later, I am now the CEO of the organization. And we're doing pretty good. 

James Lenz

And just as a side note, where did you receive a lot of your training from? 

Michael Bach  

I went to Cornell University and did a Master's certificate in diversity management. 

James Lenz

Wonderful, wonderful. We have a program through eCornell right now. A lot of our members are going through at the current time with this recording. 

Michael Bach  

So fantastic, great school now. 

James Lenz

And so Michael, if you could share with us how your organization helps other organizations today. I mean, what resources does your organization provide?

Michael Bach

So, we're an educational charity and meaning that we provide employers with educational opportunities around diversity and inclusion that comes in the form of monthly webinars, which we do at least two a month on a variety of topics. We do, at least historically, we've done in person events twice a year; we're now doing those online. And we do an annual conference, again, which we're doing online, but normally, it would be done in nine communities across the country. 

So, we we look at it from a scaling perspective of, you know, a webinar, it's one hour, it's, you know, it's informational. It's not necessarily a deep dive. Our community of practice events get a little deeper, and then our conference gets much deeper. It's a full-day exploration of one topic. So, each of those kind of builds on the other. And then we do our own research. We develop toolkits. Again, the whole focus for us is on, how do we help employers create inclusive workplaces by creating resources that will help them with that work.

James Lenz

Thank you for sharing that. Michael. It says on your website, if diversity is our strength, inclusion is our superpower. What do you mean by that? 

Michael Bach

I live in the city of Toronto. And one of our mottos in the city is “diversity is our strength.” And Toronto is a very diverse city. We have people from hundreds of different countries that call Toronto home. And I came up with that slogan, as I was working on my first book, because it's not enough to just have diversity, we have to have inclusion. We have to create spaces where people can not only exist but can be welcomed. They won't face racism, violence, sexism, homophobia, etc. And I think that in order for us to make sure that our spaces are welcoming, we need inclusion as our superpower. It's our our special strength, this thing we can do that will get the most out of our people, that will create higher levels of engagement and productivity. It is the the secret sauce, if you will, on top of diversity, because we talk so much about diversity and probably not enough about inclusion. 

James Lenz

And just for clarity purposes for our listeners, could you define diversity and inclusion? 

Michael Bach

Sure. So the word diversity is about difference. It is about all of the things that make a person unique. We tend to historically look at underrepresented or marginalized groups: women, people of color, people with disabilities, Indigenous people or Native Americans, LGBT people. But the truth is the word diversity is about difference of all kinds. And that includes straightway able-bodied men, not to say that they're marginalized or underrepresented. That's not the point. It is to say that they are different from me. As a gay man who lives with a disability, they are different from me. And so diversity is about all the things that make you different. 

Inclusion is about creating space where all of those things are welcome, where people can come to work, or go to a community center or a school or a credit union, and be welcomed and be embraced for who they are. 

Just before we recorded this, I was actually on a call and was talking with the person about me and my husband. And at no point was there any hesitation in their voice. They referred to my husband as my husband. We are legally wed. And that is an act of inclusion in making sure that there wasn't a pause, that they didn't change the language and say partner instead of husband, that I felt welcomed in that conversation. And that's what inclusion is all about. 

James Lenz

All right. And you know, now would be actually a good time based on what you just stated recently. We had a listener question that pertains to the subject we're talking about here today. And it is Russ Siemens, I'm going to go ahead and play his audio right now and wondered if you could respond to his question.

Russ Siemens  9:50  

My name is Russ Siemens, and I'm a director on the board of Innovation Credit Union in Saskatchewan, Canada. And my question is this: “The Canadian Centre for Diversity and Inclusion says that encouraging and promoting awareness of what racism is, and what it isn't, is a necessary requirement for effectively addressing systemic racism. So, what can credit unions do to lead in the discussion and understanding of what systemic racism is, and equally important, what it is not? That’s my question.”

Michael Bach  10:25  

So, it's a great question. And we're living in a time when we're having conversations about systemic racism. And I’m personally very pleased that we're having these conversations. I think the first thing that credit unions can do is acknowledge that systemic racism exists, that our countries, the United States, Canada, are built on what is effectively racist principles. 

We’re colonized countries. We came to these lands, our forefathers came to these lands and took the land from the Indigenous peoples of these lands. We have to acknowledge that. We have to acknowledge that there are systems of racism in place in every aspect of society. Owning property, credit as a whole, these are concepts that may or may not be foreign to Indigenous peoples. And so that's the first step.

Then it's examining everything that you do as an organization and figuring out where there are opportunities for change, to be more inclusive, to break down those walls of systemic racism. And I'll give you an example. These are very benign examples, but they're ones that I think really articulate the situation. 

So, every university in Canada and the United States has an English department. They then have a languages department. Now to my understanding, English is a language. And yet, we have a separate department for English because of course, it is supposedly the dominant language in our countries. Canada, however, is a bilingual nation. We also have, I'm in the city of Toronto, as I mentioned, and something like 48% of the citizens of Toronto don't speak English or French as a primary language. It's debatable whether or not English is actually our dominant language. But having a languages department versus an English department is a constant reminder that English is the preferred language. It's the better language. And that's a benign example. But it's one that really articulates, maybe we could put English under languages to acknowledge and recognize that all language has value. 

Another example in universities would be that every university has a classics department. But what's covered under classics? It's exclusively Greek and Roman. There is nothing under classics that covers anything from Asian communities, African communities, of the whole Ibero American or South American communities, Indigenous communities. Why? Why don't we get classics that cover indigenous experience? That's a classics class I would love that I would love to take. But again, it sends a message that the Euro-centric approach to life on earth is the better, is the preferred. And it's a matter of breaking down those systems.

So to answer this question, it's about looking at everything you do and figuring out where the barriers are and then dismantling them. And it really is very much hitting reset. Blow it up and start over. You may find that the best way to do things is the way you were doing them. But as long as you've done that in consultation with different communities, then you will get to the right answer versus making the assumptions on their behalf. 

James Lenz  14:08  

Great articulation there, Michael, and I think you're gonna bring up a lot of discussion from a response. I think it's even, you know, unexpected from that example, but it just showcases an example of how to use that kind of thought and logic and other forms and practices. So yeah, thank you. 

Michael Bach  14:25  

It's important to remember that what we're not talking about necessarily is individual acts of racism. You know, I call someone the N word. That is an individual act of racism versus the systems of racism that our countries are built on. And that's what we're trying to focus on. 

James Lenz

All right now. Can you articulate to our readers a few reasons why it is so important for a business or an organization to have a diverse executive team and what are some you know, list off, but what are some action steps to create a more inclusive, representative and equitable society?

Michael Bach

Well, the reason why it's important is simply about talent. If you, if you look at the numbers, and I'm going to do these off the top of my head, I don't have them written down. But people of color in the United States make up roughly about 40-42% of the available workforce and in Canada, it's about 23%. If you look at the number of women who have graduated with undergraduate degrees, it's now 60% of undergraduate degrees are taken home by women, but it's been over 50% since 1979-1980. If you just look at the sheer numbers, you cannot tell me that if you look at an executive team that is predominantly or exclusively straight, white, able-bodied men, that you actually have the best and the brightest, you don't. Statistically you don't, because you don't have a representative amount of talent. So the number one reason is about talent. It's about making sure that you are in fact hiring and promoting the best and the brightest. 

The number two reason is the customer. And it is about who is walking in the door to do business with your organization. Credit unions, as an example, are a relatively North American concept. You know, if you go into China, as an example, that concept doesn't really exist in the same way it does here in Canada or the United States. So, you then have an uphill climb in terms of convincing newcomers to our lovely continent that they should, instead of going with Bank of America or TD that they should go with a credit union. So, it's about the customer. It's about the changing face of the customer. In the United States, we bring in a million newcomers a year and in Canada, it's about 400,000. So that's 1.4 million new potential customers every year. It's about who the customer is. It's about making sure that you're recognized as an inclusive organization for customers. 

And the third is your brand. And how are you known as an organization, which of course impacts the customer and your talent. Because of course, if you're known as a homophobic organization, as a sexist organization, etc., I'm not applying to that organization. And … or I'm not doing business with that organization. It's a circle. It's a three-legged stool, and each piece is interconnected. And it's a simple business case. It's not about the right thing to do. I don't use the social justice argument of the right thing to do. And that's because, simply put, it assumes that we all know what the right thing to do is and it assumes we all agree that it's the right thing to do. It's the right thing to do for your business. It's the right thing to do for your top and bottom line. The social impact happens. But I believe that in order for it to be long term, it needs to be part of your operations and you need to look at it from a business perspective.

In terms of what you can do to be more inclusive, and I outlined this in the book, there's sort of a six-step process that I've outlined. 

Write a business case. Why does it matter? Why are you focused on this?

Conduct some form of assessment. Understand what the challenges are that you're facing.

Develop a strategy. How are you going to address the problems that you have identified, 

Execute on that strategy. This is where we do the hard work

Measure. How are you going to know if you've been successful? Everything you put in your strategy should have some form of measurement, and then rinse and repeat. 

Understanding that diversity inclusion is a journey without a destination. You are constantly on this road toward something and the finish line is just constantly moving. So, you have to go back and revisit your strategy. You have to conduct an assessment every few years. You have to come up with a new strategy, etc., etc., etc. It's a constant effort. 

But the whole point is, it's work. I promise you: If you do nothing, nothing will happen. If I don't go to the gym, I don't lose weight. Trust me, I can speak from experience. But if you do nothing, nothing will happen. And this is the number one failing of employers that I've seen, not just in Canada, in the United States, but around the world in doing this work, where they think that a potluck lunch is somehow creating an inclusive environment. It is not. It's lunch. So you need to put in the effort and treat it as a real business priority. 

James Lenz  19:40  

Great clarity, Michael. In this conversation that's, you know, 30 minutes long, I'm sure by the end here, but it's more than that. It's going to bring out a lot more discussion. Thanks to you! 

In addition to that, I was going to bring up what you just mentioned your book. It's entitled birds and we … by the way, you said your first book, so that means you have a second book that you’re writing. So we have to connect with you in another episode here the future. But Michael, you authored the book entitled Birds of All Feathers Doing Diversity and Inclusion Right. Can you share some insights for our listeners in case they want to consider purchasing it? 

Michael Bach  20:17  

Yeah, it's a how-to guide. It is very much sort of the roadmap. When I wrote it, I envisioned a variety of different readers, I envisioned CEOs and C-suite executives. I envisioned middle managers, entrepreneurs, sole proprietors, people who are just looking at this diversity and inclusion thing and thinking, How do I do this? And so, I wrote a book that said, here's how you do it. Just read these 200 pages, you'll be fine. It really isn't that challenging. And I wrote it in a way that is simplistic to some extent, and it really does have all the answers in very, very concrete ways so that there wasn't this, “Okay, I read the book and then I have to hire Michael Bach to write my strategy.” No, you don't. You don’t need to do that. You can write it yourself. Here's the process. It's also a fun book. Like I use a lot of humor in it. I fancy myself funny. I don't know if I actually am. But you nkow, whatever. It's a good thing I'm reading a book. You don't have to wait for the laughter. And it is a quick read. So, it takes about I'm told it takes about two and a half, three hours to read it. If you listen to the audiobook, it's about five hours because I talk really slowly during the audiobook. But it's, you know, I think it is it serves its purpose of helping anybody who reads it to get their brain around their role in addressing diversity and inclusion. 

James Lenz  21:50  

Terrific. If listeners want to get a hold of you, your organization, your book, can you share best means to doing so?

Michael Bach  21:57  

Absolutely. If you want to get in touch with me, you can go to my website, michaelbach.com. Or you can connect with me on social media. I'm @diversitydudemb. 

James Lenz  22:09  

That's fantastic. Thank you, Michael for being such an enthusiastic and insightful guest on today's show and sharing your insights with CUES Podcast Nation. 

Michael Bach  22:17  

Thanks for having me.

James Lenz  22:19  

Thank you for listening to this show, CUES Podcast Nation! 

You might also be interested in our new CUES and Advanced Management Program from Cornell University. Master the C-suite mindset, emerging leaders. Under the guidance of 11 Cornell faculty and members, you will deepen your knowledge of what it takes to be a successful credit union executive. For more information and to register visit cues.org/ecornell-cumanager. 

You may also recall that Michael Bach received the training from Cornell University. At the time of this recording CUES has a full class of participants currently going through our first offering of our diversity, equity and inclusion Cornell certificate program. To find out how you can earn the prestigious diversity equity inclusion certificate program that CUES offers, visit cues.org/ecornell-dei. 

If you're a CUES member, you have access to invaluable membership benefits to further enhance your development. Visit cues.org/membership to learn more. CUES is an international credit union association. Our mission is to educate and develop credit union CEOs, executives, directors and future leaders. To learn how CUES can help you realize your potential visit cues.org today.

James Lenz  0:04  

You're listening to the CUES Podcast episode 113! 

 

Hello, CUES Nation, welcome to show number 113. My name is James Lenz, CUES Professional Development Manager, your host and editor of the show. We use his special delivery channel to speak with credit union industry leaders and cross-industry experts for a wide range of perspectives on trends and topics relevant to you. 

 

You may have just completed listening to episodes 111 and 112 of this CUES podcast episode series devoted to bringing you an economic outlook to help you better understand this dynamic environment. 

 

CUNA Mutual Group's chief economist Steve Rick shared his US perspective and Episode 111 and Bryan Yu, chief economist at Canada's Central 1, shared his Canadian perspective in Episode 112. 

 

Our guest for today's episode is Dan Berger. Many of you recognize Dan Berger is the President and CEO of NAFCU. The National Association of Federally Insured Credit Unions’ mission is to strengthen credit unions by providing the best federal advocacy, education and compliance assistance in the industry. 

 

Dan first joined NAFCU in 2006, and President and CEO in 2013. Berger is also an author and economist and one of Washington's top lobbyists. He is a well-known figure with the political and financial press. He is also a recurring guest and Fox Business and has appeared on CNBC and CNN. You also find him regularly quoted in the national and financial news outlets, such as Forbes, The Wall Street Journal, The Washington Post and Bloomberg. 

 

Now, let's join the conversation again, Dan Berger’s perspective on the US economy. 

 

Hello, Dan, welcome to the show!

 

Dan Berger  2:02  

Thank you very much. Thanks for having me. Look forward to it. 

 

James Lenz  2:05  

Now Dan, we often start the show by asking our guests if they have a mantra or success quote that they live by, to allow our listeners to get to know you a little bit more and to add some perspective. Dan, do you have a mantra or success quote that you would be willing to share with our listeners?

 

Dan Berger  2:19  

Actually, James, I have two. The first one is coach Bobby Bowden, Florida state's legendary football coach. He always told players work hard on being 1% better every day. So, anything you do, whether in life and athletics, business, whatever, try to be 1% better every day. You don't succeed every day. But that is my goal every morning that I get up and come to the offices to try to be 1% better every day. 

 

And then of course, the next one is when you walk into NAFCU headquarters here in Washington, D.C., in the NAFCU lobby, it says on the wall, our employees are our greatest asset. And that's true, you take care of your employees, you take care of your staff, and then in turn, they take care of our members. You have to do that. And it's just you have to take care of staff where there's the compensation and the benefits and things like that, but more importantly, creating a culture that they want to work in. And so those are my two mantras that I try to live by every day.

 

James Lenz  3:17  

Great nuggets of advice, thank you for sharing that, always moving forward, always growing. I love that. And it's about the people business. Wonderful. 

 

Now, as we speak here during the middle and end of February 2021, there's both positive and negative news for the coming year. There is a greater sense of hope now, with the progression of the vaccine distribution. On the negative side, there are still so many unknowns. Today, we are going to focus on the economic outlook in 2021. And beyond perhaps the first place we could look at is the four-letter word: jobs. 

 

Now, Dan, wasn't it just a little over a year ago that we had the lowest unemployment rate in the United States? And then the pandemic hit. What was the highest unemployment rate in 2020 that you can recall? And where are we now in terms of unemployment rate? And what are your projections for the labor market for the remainder of 2021, and then heading into next year?

 

Dan Berger  4:10  

James, you're absolutely right. The lowest unemployment rate we had was about a year ago, and it was 3.5%. And then in April, it spiked up to 15%. And it's now settled back down to about 6.5%, 6.3, depending where you look. But there's a lot of damage done when everything got shut down. And unfortunately, it really impacted folks in the lower social-economic environment that we operate in the most. And that's the folks that work in the restaurants and hospitality and things along those lines. It was absolutely devastating, and it still is. It’s beginning to trickle back but it's still elevated and will probably remain elevated, I think, for the rest of 2021.

 

James Lenz  4:52  

We have a higher unemployment rate. Now, of course, that has gotten smaller, which is a positive thing, but consumer spending obviously has taken a hit. We've also had predictions and actualities of evictions, foreclosures, personal bankruptcies … to counter the economic downturn and provide relief for impacted households and businesses, governments across the world have enacted record amounts of stimulus. What kind of impact did these measures take? Will they take? What do you see happening next?

 

Dan Berger  5:23  

That'll bring a lot of liquidity to folks out there, including, you know, credit unions as well. And then so there'll be extremely helpful for the folks that need it today. I think they're looking to enact some type of means testing. So, make sure that people who really need it need it and that people who don't need it, don't receive it. That's kind of the debate that's going on behind the scenes right now in the sausage-making that is Washington, D.C. But now the stimulus is going to be very helpful. I think you're going to see Congress and the various regulatory agencies that have the ability to provide funding to local government, state governments, to individuals, I think that continues on through 2021. I know they're talking about an infrastructure bill and shovel-ready projects and things along those lines. That will have a tremendous impact as well.

 

James Lenz  6:18  

Thank you for sharing. What will it take, though, to get back to the very, very low unemployment rates we had before the pandemic? I mean, do you see that happening? What needs to take shape?

 

Dan Berger  6:28  

I think continuous stimulus, targeted stimulus needs to occur. The vaccine has to be you know, widespread. We have to see scientific results of the virus abating and slowly going away. It's never really gonna go away. Flu’s always out there. But that has to that'll be an impact, I think the mask will still be part of our lives going into 2022. But for the economy to continue to start humming again, increase stimulus, you know, so those businesses can reopen. But the vaccine, it all hinges on the vaccine and everybody getting their two shots. And now I think I read the word Johnson and Johnson is going to have a single shot and some other companies are looking at single-shot vaccines. When those start rolling out, that will have tremendous positive impact. And quite frankly, James optimism, you know, and a lot of some so much of it is psychology on whether it's the consumer spending and people feeling good and feeling safe enough to go out and spend again, and go out in the community and go to the restaurants and go travel and stay in the hotels and things along those lines. But it hinges the catalyst for all this to really work is the backseat.

 

James Lenz  7:39  

It's so exciting that there are other vaccines on the horizon. That certainly will help incredibly, but it's interesting, you brought up the psychological elements that are into play here. You know, that probably goes down to job security, right? More and more spending opportunities there. But also spending quality time with family. Yeah, there's so many things that go into that just feeling like it's a good time to maybe embark on some of those spending that obviously people have been withholding on.

 

Dan Berger  8:04  

Yeah, and when we saw that, if you look at it was record amounts of liquidity within the credit union industry, because people were saving. Then they got the stimulus check, and they just weren't spending it. And I think some of the folks in Congress and the economists were hoping they were going to go out and use some of that, but they were reluctant to do it for safety concerns for, and you mentioned it, job security. I don't know what's gonna happen with my job. And things along those lines and so the second round of stimulus, targeted stimulus, I think that's positive, but it all hinges on that vaccine being widespread and people getting their shots.

 

James Lenz  8:36  

It's been a crazy time for credit unions … pandemics, social unrest, an uncertain economy were hallmarks of 2020. What things have you seen credit unions do that have served them well in responding to last year's big issues?

 

Dan Berger  8:51  

I'm so proud to advocate for the credit union industry. They're actually the stories I hear from across the country with, you know, skip-a-pay programs and workout loans and things along those lines. And that's the difference between us and the big banks. When people were helping folks even before Congress said they had to do it with moratoriums and things along those lines. And, in terms of forbearance, this industry has really responded to their members as well as their communities. 

 

And then so credit unions have come up with very innovative programs to help their members through this. And that's where, in the long run, people are going to remember that institution that was there that did a workout loan for them, or did some loan modifications for them. They're gonna remember that and that loyalty. You can't buy a full-page ad like when Wells Fargo does try to re-establish trust. You have to build that over time. And that's what credit unions have, they have this incredible amount of trust, and it's even built upon even further through 2020. And you'll see it throughout 2021 as well.

 

James Lenz  9:50  

Yeah, great examples there. And of course, the great differentiation with credit unions versus other financial institutions. Now, what are some trends you are seeing as we move into 2021 credit unions might want to respond to or watch out for?

 

Dan Berger  10:05  

We're seeing a large migration of people from big cities. Everybody was, we had teleworking here at NAFCU, but a lot of people were piloting it and may not have had it, you know, company-wide or so to speak. But now they're showing that it can be done. People can do their work and be held accountable to do their work. I think you're gonna continue to see some of that migration. People live in the big cities and go into places that they've always wanted to live. You know what? I can work from anywhere now, and my employer is gonna allow me to work anywhere I want to live in, you know, Vail, Colorado, or Key West Florida, or Nashville, Tennessee, or Austin, Texas, you know what I mean? Just those dynamic places, especially the young people feel like, you know, what, I can work from anywhere, let's go live where we want to live, not necessarily where my job is and is forcing me to live. And you're going to, I think that migration is going to continue. It's beginning to slow down a little bit, but I think you're gonna see that continue a little bit.

 

James Lenz  11:03  

Yeah, I don't see that reversing. It may change a little bit in the rate, but long term, you know, those are options that didn't exist before, I think is general trust in, you know, accountability, and just parameters and scaling. So many great ways to scale. And so, you know, we're forced to do this. And I think organizations, individuals and teams have handled it so well. I think that changes economics, you know, changes housing markets, or shifts going on. The impact is incredible if you really think about it.

 

Dan Berger  11:32  

It really is incredible. And we invested heavily technology here at NAFCU several years ago, not to be prescient because of a virus. But when I became CEO, we had a snowstorm here in the Washington, D.C., area where we had five or six feet of snow. I mean, it was ridiculous. And everything shut down, as you can imagine. So we can't operate that way. 

 

So, I went to my board of directors, and they immediately, unanimously supported it. So, everybody got laptops and cameras and microphone capabilities and things like that. So, when we shut down here at our headquarters on March 13, we were digital, fully virtual within 24 hours, because we had that platform. And so with all that, there's something I don't know 12,000, 15,000 trade associations in Washington, D.C., some of them it took six to nine months to kind of find the platforms and be able to deliver content. We could deliver content immediately. And all the conferences switched over to virtual. Now we're beginning to do hybrid conferences, some of it in person and some of it online. And so, because of that investment in the strategic vision of my board of directors that are all credit union CEOs, by the way, we could flip a switch and pivot. And so that proved we always had teleworking in some format at NAFCU, but it just accelerated everybody's looking at teleworking. And so, and it works. 

 

And it doesn't work with every position, as you know. But it works the best we do. I don't care if you do it at a coffee shop, and I don't care if you do it at two in the morning. Get your work done. And you have something deliverable by, you know, 3 p.m. on Friday, and you can get it done. I don't care how you get it done. Yeah, get it done. 

 

And then so and I think that dynamic is going to be with us for a long time, James, like you mentioned, is that the workforce is going to start demanding that and we've seen that we have people in working in different states around the country that works. And they prefer that I want to be with my family in South Dakota, or I want to be with my family—we have an employee in Madison, Wisconsin. And so it works. And it just we give them that type of flexibility, but it takes the investment in that infrastructure to provide that flexibility. 

 

And having said all that, though, James, this is a terrible environment. I really dislike working in this drama. Yeah, I'm a Type A extrovert. I like seeing people in person. I like going up into Madison and Bob Trunzo and the whole team up there and not being able to do that is really frustrating to me. The relationships you build within the credit union industry with supporters like CUNA Mutual Group and others. That connection that you have for a common goal of supporting the credit union industry. It's really powerful and not to be able to do it in person, I find really frustrating. And so, I can't wait till we go back in person. One of my first trips will be up to Madison.

 

James Lenz  14:23  

As you said, you set up the infrastructure of what you have done and what organizations have done very recently, obviously, due to the pandemic or you did it prior to that. You know, it's like turning on a switch, you're ready to go. So great preparation there. Now, let's shift gears here. What are the expectations for the impact on the economy of the new Biden administration?

 

Dan Berger  14:42  

I think it's going to be twofold. I think under the Trump administration, we saw kind of a deregulation occur, which was beneficial, quite honestly, to the credit union industry where we can in turn do more for credit union members and their communities. But with the Biden administration, we're gonna see more stimulus and then to really help our economy and in help the folks out there, because there's a lot of people hurting across our country, and especially folks like we mentioned earlier in the restaurants and hospitality, industry, hotels, airlines, things along those lines. But you, I think you're gonna see a lot of focus on trying to help those that really need it, number one, but I think you're also going to see a focus on some of the social justice issues as well, the inequality issues and things along those lines. To have that discussion is awesome, and it's needed. And you can define and point to inequality in various channels throughout our society and throughout America. But I think you'll see further engagement and along those types of discussions.

 

James Lenz  15:40  

Now, besides economic considerations, what are some other ways that the new administration might impact credit unions? You actually just mentioned some of those things. Anything else you want to mention here?

 

Dan Berger  15:49  

Yeah, I think you'll see some increased activity with community development financial institutions. I think you'll see some increased CDFI funding in order to help those parts of our communities, parts of our economy, and individuals. They were just devastated by COVID. And you'll see that now I think they'll see a lot of that through CDFIs. And I think that's a real good thing for the economy, good thing for America, good things, the people that really need it. I think that most of it still relies on Congress to provide the appropriations in order to take care of the folks out there that really need it.

 

James Lenz  16:21  

Yeah, CDFIs, I had a couple of guests talk about that. And they can make such a difference for the community. It's a way for credit union to be very inclusive, you know, in their community and to serve, serve all. All right. Now, what can credit unions do to best manage these kinds of changes for the organization and members?

 

Dan Berger  16:42  

Well, you're gonna see an influx of liquidity coming. That provides an opportunity for credit unions to make more loans. And I think you're going to see them be very aggressive out in the communities and in marketing and reaching out to their members and providing loans to the folks that need it, small businesses that need it, maybe a shot, they need a new vehicle, they held off for a while and kept running and driving their clunker. And then they need to change it. And I think there's gonna be some opportunities for doing that. But credit unions had historically always done a great job of serving low- and moderate-income households. And it's the working men and women of our country, and they've done a great job. And I think you're gonna continue to see them do that. 

 

I think that we got some more stuff to get through in 2021 in regards to COVID, and cranking up the economy and getting more people and to be financially inclusive with the economy. And you'll see some more of that coming up. And it'll really, I equate it to laying the runway in 2021 so you can really take off in 2022. But I'm so pleased with this industry, in the CEOs I speak to across the country, in the jobs that they're doing. I mean, it's really been an incredible effort across the board and I don't see it stopping.

 

James Lenz  18:01  

That's wonderful, positive news means a lot that you're here. Now, if people want to connect with you and with your organization, then what's the best way for them to connect?

 

Dan Berger  18:12  

A couple ways, of course, our websites nafcu.org. I'm on LinkedIn. That's B. Dan Berger, and I'm also on Twitter. That's also B. Dan Berger. Reach out, love to connect. We respond within 24 hours. So, we're known for our responsiveness, James. And so, you send me an email or give me a phone call. You will be in touch with me. So, I look forward to folks reaching out. 

 

James Lenz  18:35  

Well, thank you so much. Thank you for serving as guest and for spending some time with CUES podcast nation. Thank you.

 

Dan Berger  18:41  

Thank you so much. Appreciate it James.

 

James Lenz  18:44  

Thank you to Dan Berger for serving as guest for this episode and Steve Rick and Bryan Yu for serving as guests in the previous two CUES Podcast episodes. This episode concludes our three-part series dedicated to providing new views and perspectives on the economic climate. 

 

I also want to take this opportunity to encourage you to visit a couple of our links to find out more about some of our new and exciting programs. For more information on our new CUES High Performing Board Digital Series, one fee for your entire board, your board liaison and your CEO, please visit cues.org/HPB. 

 

You might also be interested in learning more about our digital marketing options and opportunities. You can do so by enrolling in our all-online Strategy and Digital Marketing Cornell Certificate Program that CUES is offering starting on April 21 of this year 2021. Learn more at CUES.org/ecornell-marketing. 

 

If you are a CUES member, you have access to invaluable membership benefits to further enhance your development, visit CUES.org/membership to learn more. 

 

CUES is an international credit union association. Our mission is to educate and develop credit union CEOs, executives, directors and future leaders. To learn how CUES can help you realize your potential visit CUES.org today.

James Lenz  0:04   You're listening to the CUES podcast episode 112.    Hello, CUES nation. Welcome to another episode of the CUES podcast. My name is James Lenz CUES Professional Development Manager, your host and editor of the show.    As many of you know, we use this special delivery channel to speak with credit union industry leaders and cross-industry experts for a wide range of perspectives on trends and topics relevant to you. Right now, we are in the middle of a three-part podcast episode series devoted to bringing you an economic outlook to help you better understand the very dynamic market that we are in.   You most likely have just listened to Episode 111 where we brought in CUNA Mutual Group's Director and Chief Economist Steve Rick. Today's guest is Brian Yu. Brian Yu is from the Vancouver, BC, area. He is the chief economist at Central 1. Central 1 supports financial digital banking and payments products and services fueling the success of business across Canada. Central 1 leverages their scale, strength and expertise to power progress for more than 250 credit unions and other financial institutions enhancing the financial well-being of more than 5 million customers from coast to coast.    Brian Yu leads a team covering Canadian macro and regional economic conditions, financial markets, housing market activity and credit union system analysis. Through his engaging economic reports, Brian has become Central 1’s local celebrity, where the work featured by various media outlets, including the Globe and Mail, BNN, Bloomberg and BC Business. So, we're very excited to have Brian on the show. So, let's go ahead and start. Here's my conversation with Brian Yu.     And now I want to bring in Bryan Yu. Bryan - welcome to the show!   Bryan Yu  2:10   Great, thanks. Thanks for having me. It's great to be here.   James Lenz  2:12   Now, we often start the show by asking our guests if they have a mantra or success, quote, to allow our listeners to get to know you a bit and to add some perspective. Brian, do you have a mantra or quote that you would be willing to share with our listeners?   Bryan Yu  2:27   Oh, I would love to say it would be just be "serenity now!" from my one of my favorite old shows. But no, I think for me, what drives me largely is if you work, your hardest things will work out as they should. And that's what drives me on a daily basis that recognizing things change. But if you continue to try to do your best, things will just tend to work out regardless of how that may turn out.   James Lenz  2:48   Hard work and ethics and a forward mindset always do one good. All right now, as we speak here during the middle and end of February 2021, there's both positive and negative news for the coming year. On the positive side, the vaccine is being distributed. The impact of the vaccine brings hope. It brings hope to individuals, to families; so many people have been impacted. And it's been so devastating. We give so many things to all the health care workers for all that they have done and continue to do. But again, there is a sense of hope now with progression of the vaccine distribution. On the negative side, there are still so many unknowns. Today we are going to focus on the economic outlook in 2021 and beyond.    Perhaps the first place we could look is the four-letter word: jobs. Brian, wasn't it a little over a year ago that we had the lowest unemployment rates in the United States and Canada … then the pandemic hit? In Canada, how high did the unemployment rate get in 2020? How high did it get and where are we now in terms of the unemployment rate in Canada? And what are your projections for the Canadian labor market and for the remainder of 2021 and then heading into next year?   Bryan Yu  3:57   Yeah, you know, I think a year ago feels like a very long time ago. It feels almost like a lifetime ago at this point. Things have changed. Obviously, when we were sitting … about February of last year, Canada we were sitting at roughly about a just under 6% unemployment rate. In the US It was about 3.5 percent. They're not comparable, just due to definitions, but you know, the general trend was that they were very low in both countries.    And in Canada here we shot up from that into April but 14% unemployment rate. So you know, massive job losses, just like in the US where we did see a similar increases in overall unemployment rates. And now worse since this pandemic is kind of unfolded, we've seen a lot of these businesses adapt to the new environment. We've seen some of those economic restrictions and over a period of time, but we're still very, very high rate in Canada at about 9.5% still in the US just under 7%.    So, a very much a different world than where we were sitting at a year ago. Some areas or some sectors have recovered quite nicely, but other ones seem to be decimated by the pandemic, and that will continue I think as we sort of move forward through 2021. Although getting better, I think that the overall trend is going to be positive for the unemployment rate really dependent upon how quickly we get vaccines deployed and, of course, there's a there's an ongoing risk here that the second wave may not be the last wave as we move through the pandemic be another interruption.   James Lenz  5:23   Consumer spending and courses taken a hit. You've also got two predictions of evictions, foreclosures, personal bankruptcies. To counter the economic downturn and provide relief for impacted households and businesses, governments across the world, including the US and Canada, have enacted record amounts of stimulus, what kind of impact did these measures take? What do you see happening next?   Bryan Yu  5:46   Yeah, governments around the world have relatively quickly in early 2020 to recognizing that the measures that they would be implementing would have severe impact on the labor market. We've seen about what over $14 trillion globally being spent by various governments across the globe. In Canada, I think we moved pretty quick. We had seen the implementation of the Canadian emergency response benefit, which was largely providing funds for households who were negatively impacted by the pandemic and lost jobs, about $500 per week. So a significant amount.    We also, of course, see the wage subsidy programs in Canada as well. So employers who lost substantial amounts of business were able to tap the subsidy in order to keep individuals employed. All in all, adding that to tax deferrals, mortgage deferrals, you know, we have a rough couple of $380 billion deficit coming out of this in Canada. And this is going to be, you know, something that the government will be working with in the near future. But we're also of course, recognizing that without these measures, we could be in a much worse state at this point. We'd have the pandemic plus we'd have a lot of individuals without income, and that would have led to more foreclosures, bankruptcies, etc.    So I think when we're looking at the impact on the bankruptcy side, it really hasn't hit Canada very much. We're seeing very low delinquencies, very low loan losses as a result of a lot of these measures and plays that have helped to bridge households to dependent.    James Lenz  7:09   Well, that's good news. In Canada, what will it take in Canada to get back to the very low unemployment rates Canada had before the pandemic?   Bryan Yu  7:18   I'll say it's time, No. 1. But also, the vaccine will in fact, provide a huge boost for Canada. One of the big differences I think, between the US and Canada right now is that rate of deployment. Canada's only about 3% of our population has been vaccinated much higher in the US. Yeah. And that's really a reflection partly of the countries which are making the vaccines. The US and the UK, of course, are producers. So they are able to deploy much quicker. Canada, of course, we're waiting for supplies for the Canadian population. But as those vaccines do roll out, I do expect to see that that will finally be able to reopen some of our borders more towards tourism. People will be more willing to go into the into more restaurants, really moving back that service-oriented economy back to full capacity.    So that's my hope at this point, I think that's going to be driving our our move back to a pre- pandemic type of levels within the next two years. I would think there is still going to be a lot of challenges I think, going forward.    I'm also the view that you know, things aren't going to be the same even past the pandemic I think goes back to normal. We've seen some huge shifts in the economy, people working from home, and some of that's going to be maintained. And that's going to, of course, also, I think, create some more job opportunities and more shifting of work to rural areas, suburban areas of the market as well.   James Lenz  8:40   What is it like right now? We're at the middle and end of February as we speak, in terms of getting across the border, how challenging is it?   Bryan Yu  8:48   Canada has implemented some new measures with the new variants that are taking place, obviously, now, you know, inflows will need to quarantine in a hotel in Canada now if you're internationally coming through a flight. So that is of course a difference in terms of the where we are, so much thicker border than previously. We're also expecting to see a thicker borders in terms of vehicle travel as well. So, before we get back to normal on that end, we do need to see some herd immunity coming in place for the vaccine. And that's going to take into easily September of this year when we're looking at when close to full vaccinations will probably take place in Canada.   James Lenz  9:27   We kind of focus now on credit unions here. It's been a crazy time obviously for credit unions, for all organizations who've had the pandemic, the social unrest in an uncertain economy are hallmarks of 2020. What things have you seen credit unions do that have served them well in responding to last year's big issues?   Bryan Yu  9:46   I think that ingrained within the credit unions is a distinctly local idea and membercentricity. You know, it's been key I think to understand the challenges of the pandemic. We know that it's been uneven for individuals and different groups of individuals. Some sectors have done well; others have taken a much sharper hit in terms of employment. So, understanding that it's a localized factors, understanding your members, I think has helped credit unions a lot that has enabled them to ensure that, you know, they're mitigating the risks, recognizing which of their members may need a little more help as well. So I do think that the local aspect has been very important in the pandemic.    The second one I think, is more for you know, it's a broader that credit unions have, I think, shifted more towards digital over the past year like every other business, it seems. And that, of course, that that ability to pivot has helped credit unions stay top of mind, I think for the members.   James Lenz  10:37   Good thoughts there. What are some trends you are seeing as we move into 2021 that credit unions might want to watch and respond to?   Bryan Yu  10:45   Well, there are a couple things. I think the No. 1, this recovery itself, it's unlike others that we've seen in the past, obviously, given it’s a health crisis, and it could actually be faster than expected if the vaccines roll out quicker or as hoped. I think also, we'll see that the US economy will start to rebound quickly. And we are potentially at risk of overheating as well, given some of the fiscal measures that are expected to take place, adding to that the low interest rate environment that we are currently involved in.    So we could see some inflationary pressures rise, of course, driving some higher-end or longer-term yields in the market. And that will help I think boost the margins for credit union. So there might be some positive surprises on that end. And for Canada, that will largely spillover although Canada we have a little bit of a tougher road given the back-end situation.    The other one for credit unions, again, this is that that digital trends have been accelerated, and they're not going to be turning back in our view. Consumers are now more accustomed to doing so much online that that credit unions will need to spend more and invest more both energy and monies into digital offerings and than they previously thought. So yeah, looking at that that digital landscape and saying, “Well, how much money do we need to spend?” “How much capital do we need to deploy to ensure there's a great customer or member experience going forward?”   James Lenz  11:57   Brian, if listeners want to connect with you and your organization, what is the best way for them to connect?   Bryan Yu  12:05   Sure, they can visit our website at www.central1.com. Or they can even email me directly at byu@central1.com as well.   James Lenz  12:15   Thank you, Brian, for sharing your insights and perspectives today. appreciate it very much.   Bryan Yu  12:19   Thanks for having me.   James Lenz  12:21   Thank you to Brian you for serving as guest for this episode, and also Steve Rick for serving as guest on the previous podcast episode 111. Our three-part series concludes with our next episode featuring Dan Berger, the President and CEO of NAFCU. We'll also provide his views and perspectives on the economic climate. So looking forward to that.    In the meantime, I want to encourage you to visit a couple of our links to find out more about some of our new and exciting programs. For more information on our new CUES High Performing Doard Digital Series, where there's one fee for your entire board, your board liaison and your CEO. Check out this new exciting to your program. It starts soon, so please check out cues.org/hpb.    You might also be interested in learning more about our new digital marketing options and opportunities you can do so by enrolling in the all online Strategy and Digital Marketing Cornell Certificate Program that CUES is offering starting in April 21 learn more at cues.org/eCornell-marketing.    If you're CUES member, you have access to invaluable membership benefits. To further enhance your development. Visit cues.org/membership to learn more.    CUES is an international credit union association. Our mission is to educate and develop credit union CEOs, executives, directors and future leaders. To learn how CUES can help you realize your potential, visit CUES.org today.

CUES 111: A ‘Nice Recovery’ Forecasted for 2021 Economy, Despite the Hard Knocks of COVID-19—an Interview with Steve Rick

 

James Lenz:

You’re listening to the CUES podcast, episode 111

 

Hello CUES Nation! Welcome to another episode of the CUES Podcast! My name is James Lenz – CUES Professional Development Manager. I am excited to be with you today! On behalf of Credit Union Executives Society, we thank you for making this show a regular part of your personal professional development.

 

As so many of you know, we use this special delivery channel to speak with credit union industry leaders and cross-industry experts for a wide range of perspectives on trends and topics relevant to you.

 

You tell us that one of the reasons you like the show so much is because of the variety of topics that we deliver on – our shows often fall under the umbrella of strategy, leadership, organizational development, and culture. You think we might run out of topics – but no we don’t! As long as the members’ communities change, as long as members’ expectations change - AND their behavior, AND as long as technology continually evolves – so should credit union strategy! Organizational culture needs to also continually adapt and evolve. 

 

And that means how we think of leadership today and yesterday – may not be the same as we think about it tomorrow. Certainly, strong and highly effective leaders need to be very reflective individuals. And that’s why I am so excited about my upcoming interview with Laurie Maddalena. We will be discussing this very topic – The Leadership Evolution – so look out for that show soon! We are expecting a May release. 

There is just so much to learn. What’s very challenging for me is making decisions without evidence to support those decisions. I get excited about making data-based decisions & solving complex problems. As leaders – we all know, due to the pandemic, we’ve had to make some tough decisions with very little information at hand – both personally and professionally. And that doesn’t make us feel real comfortable, of course. There have been so many unknowns, right? 

 

Well…to provide some level of relief and improved contextual understanding, we are dedicating the next 3 episodes to help you do just that. In relatively quick fashion, we are delivering to you – CUES Podcast Nation - a 3-part series focused on the economic outlook. That’s right! Today starts the first of three episodes where we bring in an economist to help you speculate and understand this dynamic market. We are bringing in 3 economists. One economist for each episode. Each economist will bring their own perspective and insights to best serve you! 

 

Today’s special guest is Steve Rick, Director and Chief economist at CUNA Mutual Group. In his role at CUNA Mutual Group, Steve’s primary responsibilities include conducting strategic research, analysis, and forecasting of the financial services industry with special emphasis on the consumer and credit union markets.

Rick’s forecasts serve as a starting point for the strategic planning process and help to create a clear understanding of the underlying trends and links between the general economy, the financial services industry, and CUNA Mutual’s policy owners. Steve publishes the Credit Union Trends Report, a monthly “pulse check” on the economic state of the credit union movement. He has authored a textbook on asset-liability management for credit union executives.

Before joining CMG Rick was the Senior Economist for CUNA & Affiliate’s Economics & Statistics Department for 22 years. Steve is also a senior lecturer at the University of Wisconsin-Madison, AND he serves on the Board of Directors of the University of Wisconsin Credit Union, a $2.4 billion financial institution. Oh – we have an extra special surprise in this episode – one of you will be joining us in this episode. We are bringing on a member of CUES Podcast nation to ask our guest a question. Now let’s join the conversation with Steve -

 

Yes, Rick, we often start the show by asking our guests if they have a mantra or, you know, success quote that they live by, to allow our listeners to get to know you a little bit and add some perspective. Rick, do you have a mantra or quote that you live? Rick, do you have a mantra or quote that you would be willing to share with our listeners?

 

Steve Rick:

Yeah, I do. Actually, on my wall, I have a poster here. It's a quote by Mark Twain. And years ago, he said, The secret of getting ahead is getting started. You know, remember when you were in high school or college, and you had to write that term paper, and it was so difficult, but once you actually started doing it and get started, that's really the secret of getting ahead is just to get started. You just got to pull the trigger and go. And I've used that in my business career. And it's it seems to have worked for me. And I hope I can help others.

 

Lenz:

Yes, served you well, I heard that one before. And definitely a big piece of advice there. Thank you so much. Now as we speak, during the middle and end of February of 2021. There's both positive and negative news for the upcoming year for this year. On the positive side, the vaccine has been distributed, distributed, the impact of the vaccine brings hope it brings hopes, that brings hope to individuals to families to so many people that have been impacted. And it's been so devastating. So it gets so many thanks to all the health care workers for their effort, time, energy and perseverance. But again, there's a greater sense of hope. Now, with the progression of the vaccine distribution. On the negative side, there are still so many unknowns. Today, we are going to focus on the economic outlook perhaps the first place we could look at is the four-letter word jobs. Rick, wasn't it a little over a year ago that we had the lowest employment rate in the United States, and then the pandemic hit? What was the highest unemployment rate in 2020? And where are we now in terms of the unemployment rate? What are your projections for the labor market for the remainder of 2021, then heading into next year, Rick?

 

Rick:

Sure. You know, last year and 2020, back in February, so one year ago, we had an unemployment rate of 3.5%. Now To put that in perspective, economists believe about 4.5% is kind of the long-run natural unemployment rate, if you will, that's where the economy tends to go to 4.5. So at 3.5, we consider that a very tight labor market translation. 

 

You know, employers had a really hard time finding qualified workers to come, you know, work at maybe at their bank or credit union or Harley Davidson motorcycle, they're in Milwaukee, it was very difficult. So they're working overtime. And of course, wage costs go up, you're paying time and a half, or you're paying higher wages just to attract people in so it was a tight labor market. But then, of course, we got hit with the covid-19 pandemic. And by April, we were up to 14.7% unemployment, right, mainly due to all those government shutdowns. 

 

Remember, those government-mandated non-essential businesses were shut down. Fortunately, the good news, we're back down to 6.3% unemployment rate today. But, if you kind of count all the people who have left the labor force, who did have a job last year, but have kind of left the labor force, kind of given up searching for a job. Now the unemployment rate could be closer to 9-10% once you include all those workers who are left.

 

For my forecast for the rest of this year, we do believe we will reach herd immunity, probably by the fourth quarter of this year, and you know it will be slowly approaching it you know, that's where what 75 to 80% of our population has been vaccinated and is now immune. So we're hoping by the end of this year, to have the unemployment rate down to 5.5%. Remember, 4.5 is our target. We expect to hit that 4.5 by the end of next year. 2022. So it's almost going to be about another two full years to get back to that natural unemployment of 4.5%.

 

Lenz:

That's great perspective. Thanks for adding those notes there. We have now we have a high unemployment rate now, actually not as high as I thought based on what you just said. But there is concern consumer spending is taking a hit. We've also got predictions of evictions, foreclosures, personal bankruptcies. To counter the economic downturn and provide relief for impacted households and businesses, governments across the world have enacted record amounts of stimulus. What kind of impact do these measures take? Will they take? And what do you see happening next?

 

Rick:

Well interesting, you know, in December, we had another one of the stimulus bills passed, which paid out another $600 in stimulus checks, which basically went into the bank accounts of millions of Americans back in January. So just think, all these banks and credit unions got the $600 checks piled in. This morning, just this morning, about an hour or so ago, the latest retail sales report was released for January. And guess what happened? We saw sales pickup 5.3% compared to December. Now, that's a huge jump. I mean, yeah, this these numbers I got for one month 5.3%. And if we can compare this January of 2021, compared to January 2020, you know, January 2020, that was before the pandemic. We're up 7.4%. Now, that is a huge increase, 7.4% in spending. And when we talk about recent retail sales, that's the stuff when you and I go to a store, we buy something and put it in a bag and then put it in our trunk of our car. That's where we're talking about is stuff you buy, actually get your hands on the goods part of the academy. So we're actually seeing a nice recovery already.

 

You may have heard the economist Larry Summers, very smart guy, Harvard economist, worked in the Obama administration as the Secretary of the sector of the Treasury. He's actually worried that we could see an overheating economy. He's worried about if we do pass another $1.9 trillion stimulus package, we could see inflation pick up in this country, which would kind of be alright, because we've had low inflation for the last few years. And the Federal Reserve wants to see inflation at about 2% on average for the long run. So we could see actually just giving my forecast, we're forecasting GDP growth this year, in 2021, of about 4.5 percentage points. So we're going to be making 4.5% more stuff, if you will, than we did last year. And last year, you know, we got the latest numbers, we dropped 3.5% in the production of goods and services last year. So, a nice recovery for 2021. Or mainly because all of these, if we get another $1,400 stimulus check sometime this spring, you know, if President Biden gets his 1.9 trillion stimulus, we could see a really strong economy going into the second half of this year.

 

Lenz:

Interesting news and insights there. I think you may have answered this, but what will it take to get back to the very low unemployment rates that we had before the pandemic?

 

Rick:

There is some scarring taking place in the economy, some permanent impacts where, you know, we as we know, there’s businesses that have gone out of business, and they're not coming back, especially in the retail space. As you know, we call this the retail apocalypse. You know, a lot of these small stores are not gonna be able to compete either with online, you know, say the Amazon dot coms of the world, and they're just gone. And so you have a lot, I mean, I'm sure you've driven by strip malls and your local mall, and half the stores are empty, well, they're not coming back. And so a lot of those employees are going to have to be retrained into other fields. And it always takes a while to retrain people. People just don't get a new skillset right away. They don't automatically become a nurse or a computer program. It's going to take years. So there's some economic scarring out there taking place. But you know, we will once the economy has opened up this spring, the service sector of the economy, which has really hurt, I think of hotels and restaurants and movie theaters, you know, I think they will reopen and hire some people back. But as we know, there's some movie theaters that are permanently shut down, restaurants that are never coming back. And so it’s gonna take a while, like I said, maybe two years, before we get back to that natural unemployment rate of 4.5%.

 

James:

Interesting. It's certainly been a crazy time for credit unions … pandemics, social unrest, and an uncertain economy were all hallmarks of 2020. What things have you seen credit unions do that have served them well in responding to last year's big issues?

 

Rick:

Well you know the biggest topic last year, well, two things. One, that huge surge in deposits. We just got the latest numbers in for the full year 2020. And credit union deposit growth was over 20%, which is the fastest we've seen since really the middle 1980s. Now why do you have to go back to the 1980s? Remember that there was a savings and loan crisis back in the 1980s where hundreds of savings and loans failed, where all those customers of those savings and loans moved their money over to credit unions so we had a big surge in deposits. So you need something like that to see a huge surge this year. Well, why did credit unions get a 20% surge this year? Well, one, we had those $1,200 stimulus checks last March, you know, in March of 2020, remember that. And a lot of economists have done research on that. And they found out that 80% of that $1,200 stimulus checks were either saved or used to pay down debt. Think of a credit union. You got 80% of this $1,200 check either put into savings that is maybe at a credit union or was used to pay off their credit card or a home equity loan. So last year, credit unions have had weak loan growth and very fast deposit growth, because of, you know, to a large extent, these stimulus checks, but also because, you know, we were at a pandemic, and people weren't going out to restaurants, movie theaters, and sporting events. So they're just saving money in that respect. And they're not driving to work. So saving money buying gasoline and not buying nearly as much gas as they've done. So for credit unions, it was a huge year last year, but with the stimulus checks going up this year, we're gonna see credit unions probably see another year of 15% deposit growth. So just think that 20% last year, 15%, this year, add those two numbers together roughly, 35% growth in deposits, or you could say asset size for the typical credit union in the United States. So it was a remarkable two years that we're going through.

 

James:

What are what are some trends that you're seeing, as we move into 2021, that credit unions might want to watch and respond to?

 

Rick:

A big trend right now is still the mortgage refi boom, you know, for credit unions that were into mortgages last year, they did actually extremely well. If you were a big mortgage player, you had probably, you know, close to record profits, because, you know, we originate these mortgages, and then we sell a lot of them off into the secondary market, you know, to Fannie Mae or Freddie Mac, and they were paying a very nice premium for those mortgages last year. 

 

So that one category called “gains on sales of mortgages” was huge for creditors who are big into mortgage lending. And we expect the mortgage refi boom to continue through the first half of this year before your interest rates slowly start to creep up. And then that mortgage refi boom will taper off. But right now, credit unions are still in I mean, what's really driving this economic recovery is housing. Home prices are up 13% year over year. It almost seems like we have another housing bubble going. Remember back in 2005, 2006, we had the last housing bubble, but I'm going to use the four most dangerous words an economist can use. This time is different. It's not the same housing bubble we saw back then. Last time, it was a demand-side problem. Member banks and some credit unions were kind of lending money to basically just about anybody, you know. If you had a heartbeat, you could get a mortgage loan. We don't do that anymore, fortunately. But home prices are rising again. Why? Because it's a supply-side phenomenon. We don't have enough supply and economic theory tells us when it's a supply-side phenomenon, it's not really going to be a bubble. We're just not building homes fast enough mainly because we just can't find workers, you know, we can't find the carpenters, plumbers, electricians to help build these homes for the demand that we see out there.

 

Lenz: 

Yeah, I've noticed that in our own home has risen incredibly. And they're just, uh, you know, I got a nephew looking for a home and there is nothing out there that does not have an offer on. It's just it is a supply-side. So do you see and you said it's harder to find workers to do that. But I mean, what is that spring and summer and fall look like for the housing market in terms of production? I know. Housing prices are high land prices have risen incredibly as well, and the supply of materials to build houses is skyrocketed as well.

 

Rick:

Yeah, we're seeing we're seeing how housing starts pick up 20-30% compared to a year earlier, so it is surging. I mean, we are trying our best to get these housing starts going. But we should be producing a lot more than we currently are. The shortage, like you said, the shortage of buildable land, prices for lumber and other things that go into a house are rising very dramatically. And like I said, we've got that labor shortage going on. But it's a good thing to have, you know. Get some of these people who are maybe unemployed and get them retrained to become a carpenter or a plumber or electrician working in the housing sector.

 

Lenz:

Interesting, again, so many insights, so many changes. I love how you've kind of synthesized all these trends, what's going on to share with our listeners. Just a couple more things. What are your expectations for the impact of the economy of the new Biden administration? You touched on a bit anything you want to add there?

 

Rick:

Just getting the vaccination out there. I mean, the way they've kind of redoubled their efforts to get that vaccine into the arms of millions of Americans. And you see, we're over one and a half million Americans are getting vaccinated, you know, every day, which is great. To get that up even more up to 2, 3 million a day is what we really need to be saying. And once again, there are some constraints, you got to train people in order to administer the vaccine. But we are moving in the right direction. As I said, we hopefully will reach that herd immunity in the fourth quarter of this year, which will mean the economy would be somewhat back to normal. We can all go on, start living our lives again, going out visiting, people taking a trip. And once again, that will be good for the hotel industry, the airline industry, the restaurant industry. A lot of things will come back in the second half of this year. 

 

Lenz:

Sounds like a very positive outlook coming ahead here. Besides economic considerations, what are some other ways that the new administration might impact credit unions?

 

Rick:

Well you know that there is talk right now, well, kind of indirectly about forgiving $10,000 say worth of student loan debt. So if we kind of free up say that millennial generation, that's a generation that's really saddled with a lot of debt and people between the ages of 25 and 39. So if we can kind of relieve some of that debt burden on them, that'll free them up to be able to maybe purchase that home, or purchase that car, and maybe get that loan from a credit union for a mortgage loan or an automobile loan. Well yeah, the millennial generation is saddled with debt, which has postponed when they can actually really start a family and build a house. So that's one proposal that we'll see playing out. I just saw Joe Biden was on TV last night. He was here in Wisconsin, giving a town hall meeting on CNN. And he was asked that question, he said, “Hey, I'm for a $10,000 kind of loan forgiveness.” But there are some progressives in the Democratic party who want to go up to $50,000 in loan forgiveness, which would really free up a lot of let’s say millennial generation of their debts. But he said he wasn't for that. He says only for 10,000. But once again, that'll help out millions of Americans relieve some of that debt burden they have from their college years.

 

Lenz:

And one final thing and bring it right back to credit unions, right? What can credit unions do to best manage these kinds of changes for the organizations and their members?

 

Rick:

You know, the big challenge this year is going to be net interest margins, you know, the difference between our yield on our assets, what we're earning on our loans and investments, and what our cost of funds is, what are we paying our members for the use of their deposits. And we're gonna see the tightest net interest margins in history this year, mainly as these low-interest rate environments going to be here. So all those old loans are going to be repricing into new, lower-rate loans. And all those old investments are rolling over into new lower rates. So we're gonna see very record low yield on assets and record all net interest margins. So credit unions are really focusing on basically managing their costs, you know, giving their cost down to match that very low net interest margin. So cost containment is still going to be a major issue, just like it was last year for credit unions. How can they restructure? How can become more efficient, more productive? You know, we are seeing a little bit of economies of scale. If you think of the, you know, operating expenses as a percent of your total assets. Remember that assets in the denominator of that ratio has grown 35% in the last year. So it's giving us a little bit of economies of scale. We're getting more size from all these deposits. But once again, containing costs can be a major issue because we're forecasting return on assets, you know, ROA, basically lower than it was in 2020.

 

So there are going to be some earnings pressures this year due to very tight net interest margins. 

 

At this point in the show, Cynthia Ryan, EVP chief operations of Connect CU, Ft. Lauderdale, Florida, is introduced. She says what she likes about the CUES Podcast.

 

The CUES Podcast … I like listening to the different topics, so I spent a lot of time listening at home and at work. 

 

Then James Lenz asks introduces Steve and Cynthia

 

Hi Steve, How are you?

 

Hi Cynthia, how are you doing?

 

So, Steve, I know you’re great with these kinds of questions.

 

With the member savings rate substantially increased, what are a few strategies that we as credit unions should employ to improve our balance sheets?

 

Rick talks about rebalancing risk exposure. 

 

Lenz:

 

Wow, this has been such a great economic outlook and forecast. You've been so helpful. If listeners want to connect with you and your organization, what is the best way to connect?

 

Rick:

Oh, my email is Steve.Rick@cunamutual.com if they would like to email me some questions, comments or issues relating to credit unions or the economy.

 

Lenz:

Thank you so much for sharing your insights and perspectives. Have yourself a great day.

 

Rick:

Thanks, James. It's been fun.

 

The outro plays here

 

“For some reason, people just love pineapples,” says Bolun Li in this episode of the CUES Podcast. As a result, pineapple emojis are the points in Zogo, the gamified smartphone app that Li co-launched in 2019 to better teach personal finance to members of Gen Z.

CEO of CUES Supplier member Zogo Finance, Li says that pineapples tested extremely well during the app’s development.

“We tested so many different emojis for the points,” he explains. “We have no idea why people love pineapples, but they love pineapples. So, we’re like, we’re going to use pineapples” for the point system.

A 2019 graduate of Duke University, Li first learned about personal finance through a high school program that was delivered by a bank. He describes that offering as “boring” and “inadequate.” 

In contrast, the app he and his co-founders (all members of Gen Z themselves) have launched aims to teach members of Gen Z about personal finance in a way they find fun. Zogo offers more than 300 bite-sized learning modules and awards pineapple points for module completion that can be redeemed for gift cards or deposits in accounts at partnering financial institutions—such as credit unions.

During the show, Li tells the story of his introduction to credit unions. Since then, Zogo has partnered with more than 75 CUs to help them attract Gen Zers—members CUs need to connect with now to ensure a bright tomorrow.

When users first log into Zogo, they are invited to put in a code from a financial institution. Once they enter a CU's code, the app becomes  co-branded with the CU’s colors and logo. In addition, a CU has access to a dashboard of information about app users. Partnering CUs can also create custom  learning modules about their product offerings, community commitment or whatever topics they wish.

This year Zogo is rolling out a unique approach to offering financial education in schools. It reaches out to students, not teachers, to be ambassadors for the app and the CU partner. “These students will be going out there with the Zogo app and spreading the credit union’s name within their generation, their friends," he says. Young people are much more likely to use something “when it’s recommended by their friends than if it’s being enforced by their teachers. We want all the Gen Zers to think personal finance is very fun and their local credit union is very cool.”

The show also gets into:

• how pleased Li was to learn that Zogo appeals to people of all ages, not just Gen Zers
• the national awards Zogo has won
• the 24-hour process for a CU to sign up for Zogo
• what Li thinks CUs need to have in their strategic plans to better attract younger members
• what Li learned from surveying Duke students about CUs
• what board members need to know about Gen Z and the future
• Li’s rallying cry for Financial Literacy Month in April

Links for this show:

• CUES Supplier member Zogo
• Two CUES articles by Zogo: here and here
• More on generational strategy and marketing